Financial advice

[Not_An_Abba_Fan]

While I agree with you in principle spice weasel, it is the main residence mortgage I am referring to. If you are paying more in interest than you earn from a term deposit you are in front by putting extra funds into your mortgage.
Investment property isn't just about a rental income. You add that to the return you get when you sell the property then it is a worthwhile investment. This s just my opinion. So far it is working for me as we are still riding the wave of the property boom here. A 100% equity jump in 12 months is better than 6.05% on a term deposit.

 

[Not_An_Abba_Fan]

To be very frank I couldn't agree more, I was going to say the same thing but neglected to mention it. Financial planners spend their time doing this professionally and are qualified to give appropriate advice and guidance on these matters.

[WHINGE] The same can be said for mechanics. Four year apprenticeship, then a number of years gaining experience to be able to offer qualified advice. Every man and his dog gives opinions, advice and even 'guarenteed' fixes on various problems and nobody jumps up and down about accountability. I never told Bravotwozero do this or do that. I told him what works for me and what my opinion was on another persons post. I'll cop the advisor liability issue because I honestly thought it was a 'take this advice at your own risk' type of thing just like a tax agent. So if I undertake a repair that someone has suggested and bugger it up, can I sue them? Before people start waving the qualifications flag, have a think about the solutions you offer and are these qualified opinions or just a 'try this and see how much money you can spend' because, hey, it's not my car. [END WHINGE]

 

[spice weasel (BAM)]

The reason i am specifically discussing rental income is because i am separating income and growth component. I definately agree with you that if you have money earning 6.05% in the bank and you have a mortgage you should be paying the mortgage off, its common sense, but my understanding is that we are talking about rental property returns, and borrowing to invest, not about your lifestyle assets.

From a growth perspective i have already said i believe the boom to be over for now, although i agree with you the boom has definately lasted longer in both WA and down here where i live in tassie due to median house prices being substanitally lower in these areas and we had a bit of catching up to do compared to other states), however i find that people are still very attached to the massive growth that has occured for a few years, and im talking about continuing to search for the best return, which at the present moment is definately not the residential rental market.

Once again these are just my thoughts, i am not saying that you cannot make money off the residential rental market, just that in the present market there are much better returns to be had and that in the long run (10 years plus) shares will outperform residential property, especially with the income being concessionally taxed (imputation credits on franked dividends)

 

[spice weasel (BAM)]

I think it is also important i make a comment on diversification.

If all your funds are in the housing market, not to mention the housing market in your state, if things take a downturn you can take a serious hit on your net wealth. You know the old saying about not putting all your eggs in the one basket.

When putting together a portfolio, (depening on risk preference) we make sure our clients are not just in one asset class, we mix across direct shares (aust and international), residential and commerical real estate and also fixed interest/govt bond products, hedged funds etc. So im not sure personally i would be entirely comfortable having all my funds tied up in large assets which cost substantial amounts of money and time to get access to your capital (without incurring interest if you loaned money instead of selling, whereas i can get access to the fixed interest component of my portfolio quickly and without cost, meaning i can leave more of my funds invested earning money and don't feel quite at much as risk.

 

[Not_An_Abba_Fan]

Point taken. I have shares as well but at the moment I am seeing better growth in my properties. Like I said, when the interest only period runs out, I will be selling them and paying off my residential mortgage. They were never a long term investment anyway, 5 years maximum and I took an opportunity when it arose. Take advantage of any boom if you can. I think I might invest in coal......

 

[Marco-EFIVL]

[WHINGE] The same can be said for mechanics. Four year apprenticeship, then a number of years gaining experience to be able to offer qualified advice. Every man and his dog gives opinions, advice and even 'guarenteed' fixes on various problems and nobody jumps up and down about accountability. I never told Bravotwozero do this or do that. I told him what works for me and what my opinion was on another persons post. I'll cop the advisor liability issue because I honestly thought it was a 'take this advice at your own risk' type of thing just like a tax agent. So if I undertake a repair that someone has suggested and bugger it up, can I sue them? Before people start waving the qualifications flag, have a think about the solutions you offer and are these qualified opinions or just a 'try this and see how much money you can spend' because, hey, it's not my car. [END WHINGE]

Granted mate, granted

 

[Taso]

Just so u know equity = assets - liabilities, so ur equity is 300,000 - 150,000 = 150,000. But ull prob find that only $70,000 of that is useable, since banks dont like taking risks.

if it were me, id sell both properties, rent the place where u want to live and invest all the money into an asset(s) with better risk/return characteristics.

 

[jules]

Not a problem minux, i get a little touchy on this subject i have seen many bad results of people listening to people they shouldn't be.

i'm not baiting you but have you read ASIC's report on the financial advice industry?

their results were quite scathing of the quality of advisors. you could well be one of the excellent ones so don't take it personally but since i wouldn't know how to sort out the good from the bad i'm not about to queue up.

 

[Reaper]

i'm not baiting you but have you read ASIC's report on the financial advice industry?

their results were quite scathing of the quality of advisors. you could well be one of the excellent ones so don't take it personally but since i wouldn't know how to sort out the good from the bad i'm not about to queue up.

True. I think the best thing is for people to get educated themselves first. They don't need to be experts but know enough to understand if they are being fed a load of bs or not.

Even if one doesn't have this education, selecting the right adviser for you is critical. I have misgivings about anybody employed by a bank or financial institution. Good word of mouth recommendations are a great start here (same goes for accountants).

Cheers,
Reaper

 

[jules]

the problem with financial advisors is not the advisors, but the nature of the industry and ignorance of customers. since the customer often doesn't know the difference, it is too easy for advisors to profit by recommending products they are paid to recommend, over the ones that may be best for the customer.

a friend of mine told me a story of how good her advisor was, always swapping her portfolios to 'keep her ahead of the market'. this is often in fact churning where the advisor gets a commission each time and isn't in the customer's interest. this is the sort of thing that motivated ASIC to conduct their survey.

you're dead right Reaper, there's no substitute for understanding the basics yourself. exact same thing when you take your car into the workshop for a service.